Proposed Amendment to the FSCMA Introducing “Fair Value” for Mergers of Listed Companies Passes the National Policy Committee

On May 14, 2026, the National Policy Committee of the National Assembly passed a proposed amendment to the Financial Investment Services and Capital Markets Act (the “FSCMA”), which requires the merger value of listed companies to be determined based on a “fair value” (the “Proposed Amendment”). This legislative development is seen as part of the government’s ongoing efforts to improve corporate governance policies.^[1]

Previously, through amendments of Article 165-4 of the FSCMA and Article 176-5 of the related Enforcement Decree, the valuation standard for mergers involving unaffiliated listed companies was changed from the market share price to a fair value evaluation standard (Link). The Proposed Amendment expands this requirement to mergers between listed companies and their affiliates. This change aims to enhance fairness in merger ratio regulations, thereby mitigating conflicts of interest between majority shareholders and minority shareholders, as well as addressing controversies over the dilution of corporate value. Consequently, it is drawing significant attention from both companies exploring or preparing for corporate restructuring transactions and capital market investors.

If the Proposed Amendment passes the Legislation and Judiciary Committee, is approved by the plenary session of the National Assembly, and is promulgated by the government in its current form, it will take effect three months after the date of promulgation. It will apply to transactions where the board of directors resolves on a merger or similar transaction after the enforcement date. Key details of the Proposed Amendment are as follows:

Change to the standard for calculating the merger value (Article 165-4(1))

Under the current FSCMA and its subordinate statutes, when a listed company enters into a merger, an acquisition or transfer of a significant business or asset, a comprehensive share exchange or transfer, or a spin-off or split and merger (each, a “Subject M&A Transaction”) with an affiliate, it must calculate the transaction value based on a market price formula, while valuation standards apply when a transaction is with an unaffiliated company (Article 165-4(1) of the FSCMA, Article 176-5(1) of the Enforcement Decree of the FSCMA).
However, the Proposed Amendment repeals the market price formula applied to Subject M&A Transaction between affiliates, requiring instead that the transaction value be determined as a “fair value calculated by comprehensively taking into account the share price, asset value, earnings value, etc.”

Statutory codification of the duty to prepare and disclose a written opinion of the board of directors (newly established Article 165-4(2))

Under the current Enforcement Decree of the FSCMA and the Regulations on Issuance and Disclosure of Securities (the "Securities Disclosure Regulations"), if a listed company intends to pursue a Subject M&A Transaction with another company, it must prepare a written opinion of the board of directors prior to the resolution of the board of directors on the merger, all directors must affix their names and seals or signatures thereon (Articles 176-5(6) and 176-6(5) of the Enforcement Decree of the FSCMA), and the written opinion must be disclosed as an attachment to the registration statement (Articles 2-9(2)14 and 2-10(6) of the Securities Disclosure Regulations).
The Proposed Amendment explicitly codifies into statutory law the obligations to prepare and disclose the aforementioned written opinion, stipulating that non-compliance will subject the company to enforcement actions by the Financial Services Commission.

Mandatory disclosure of external valuation results (Article 165-4(3))

The current FSCMA and the Enforcement Decree of the FSCMA mandate that companies “must undergo” an evaluation by an external appraiser regarding matters such as the value of a Subject M&A Transaction (Article 165-4(2) of the FSCMA, Articles 176-5(8) and 176-6(4) of the Enforcement Decree of the FSCMA). Furthermore, the Securities Disclosure Regulations require an external appraiser's appraisal opinion to be attached to the registration statement for disclosure (Articles 2-9(2)11 and 2-10(6) of the Securities Disclosure Regulations).
The Proposed Amendment also explicitly codifies into statutory law this disclosure obligation for appraisal opinion, providing that violations will be subject to enforcement actions by the Financial Services Commission.

Selection of external appraisers by the auditor/audit committee in mergers with affiliates (newly established Article 165-4(4))

Under the current Enforcement Decree of the FSCMA, when a listed company pursues a Subject M&A Transaction with an affiliate (an "Affiliate M&A Transaction"), it must obtain the consent (resolution) of the statutory auditor or audit committee, as applicable, for the selection of an external appraiser (Articles 176-5(10) and 176-6(5) of the Enforcement Decree of the FSCMA).
The Proposed Amendment mandates that in cases of Affiliate M&A Transactions, the statutory auditor or audit committee, as applicable, must itself select the external appraiser, thereby strengthening the authority of the statutory auditor/audit committee.

Disclosure of interests involving specially-related parties (newly established Article 165-4(6))

According to the Proposed Amendment, a listed company that conducts an Affiliate M&A Transaction must disclose any conflicts of interest or specific relationships between its specially-related parties (as defined under Article 9(1) of the Monopoly Regulation and Fair Trade Act) and the counterparty to the Affiliate M&A Transaction (newly established Article 165-18 Subparagraph 4-3).

Amendment to the standard for calculating the purchase price for appraisal rights (proviso of Article 165-5(3))

Article 165-5(3) of the current FSCMA and Article 176-7(3) of the Enforcement Decree of the FSCMA stipulate that if the company and shareholders fail to reach an agreement when a shareholder exercises appraisal rights, the purchase price is calculated based on the “market share price.” However, this has sparked criticism regarding inconsistency with the existing amendment which mandates the calculation of the merger value be based on valuation standards for mergers between non-affiliated companies of a listed company.
Reflecting these discussions, the Proposed Amendment dictates that even in the case of Subject M&A Transactions, the board of directors must calculate the base purchase price for dissenting shareholders’ appraisal rights by “comprehensively taking into account the share price, asset value, earnings value, etc.” If no agreement is reached between the company and the shareholders, this base price shall apply, and the mechanism allowing shareholders to petition the court to determine the purchase price if they still object remains unchanged.

The Proposed Amendment goes beyond merely altering the method for calculating merger value. Combined with the amended Article 382-3 of the Korean Commercial Code, which took effect on July 22, 2025 and expanded the scope of a director's duty of loyalty to include "the company and its shareholders" while introducing duties to protect the interests of all shareholders and treat them fairly, the Proposed Amendment is expected to substantially broaden the scope of conduct standards imposed on directors during corporate restructuring transactions such as mergers.

Previously, as long as the merger value of a listed company was calculated according to the formula set out in the Enforcement Decree, the room for disputes over its legality was relatively limited. However, following the implementation of the Proposed Amendment, legal disputes are expected to rise regarding whether the board of directors calculated “fair value” that comprehensively considered share price, asset value, and earnings value in restructuring transactions, and whether they exerted their best efforts to prevent shareholder losses. In particular, whether a price is “fair” could become a direct subject of review not only in lawsuits on the merits challenging the validity of shareholder resolutions approving the merger, but also at the preliminary injunction stage.

Accordingly, proving that sufficient procedural steps were taken to ensure the fairness of the transaction value during future corporate restructurings will become crucial. In this regard, companies can refer to the "Guidelines on the Standards of Directors’ Conduct in the Context of Corporate Restructuring" published by the Ministry of Justice on February 25, 2026 (Link). As these Guidelines propose (i) the establishment and operation of a special committee, (ii) review by independent external experts, and (iii) the provision of comprehensive information to shareholders as measures to enhance fairness, listed companies reviewing or considering restructuring transactions should stay mindful of these legal principles.^[2]

Meanwhile, aside from the matters included in the Proposed Amendment, discussions continue regarding the necessity of amending the FSCMA to introduce a mandatory tender offer rule that includes the sharing of management premiums in M&A transactions, as we previously explained (Link). Furthermore, other significant developments concerning corporate governance reform remain underway, such as the approval of amendments to Korea Exchange regulations for delisting reform measures and preparatory work regarding the ban on double listings following the Financial Services Commission's policy announcement. Given these active shifts, monitoring the overall changes in the capital market environment will be of critical importance.

[1] In connection with this, as we previously noted, the government has announced its policy directions through the “Capital Market Stabilization and Normalization Meeting” presided over by President Jae-Myung Lee on March 18, 2026, and the Financial Service Commission’s announcement on “Plans to Improve the Capital Market’s Structure for Stabilization” on March 19, 2026 (Link). These directions include: (i) prohibition on double listings, (ii) prevention of damage to corporate value, such as by leaving low stock prices unaddressed, and (iii) strengthened monitoring of institutional investors by improving the Stewardship Code. In particular, regarding the policy to prevent damage to corporate value, such as neglecting to address low stock prices, the government stated it would push for fair value calculation and mandatory external evaluations during M&A transactions, and would support the swift enactment of a related amendment to the FSCMA, which has already been proposed.
[2] For reference, some of the proposed amendments to the FSCMA included the introduction of approval of uninterested shareholders or the affirmative vote of a majority of minority shareholders, but this was not included in the Proposed Amendment as it was removed during the National Policy Committee's review process.

[Korean Version]

Share

Professionals

Professionals